All or Nothing

dubai-police-lamborghiniLast year saw a 13.9% surge in foreign direct investment into the UAE, rising from US$ 24.5 billion in 2011 to US$ 27.9 billion. The improving economic climate and Dubai becoming more of a safe haven for overseas funds are the reasons behind this massive improvement. The emirate has more than recovered from the GFC when even as late as 2011, the value of cancelled and suspended projects was put at a staggering US$ 354 billion.

February was a boom time for Dubai hotels with occupancy rates increasing to 90.1%.  All industry indicators headed north including TRevPAR 11% at US$ 523.86, Average Room Rate at US$ 334.79, RevPAR 10.3% to US$ 301.70 and GOPPAR 12.7% at US$ 261.08. There is no doubt that this sector is a reflection of the Dubai bounce back and will continue to expand despite more inventory coming on stream this year.

Trade has always been Dubai’s lifeblood and it comes as no surprise to see that the country has the largest Arab market for imports (at US$ 381 billion) and only second to Saudi Arabia when it comes to exports. What is more surprising is, that according to a recent UN report, UAE is the world’s 25th largest importing country – accounting for 1.1% of the total imports of US$ 15.37 trillion – and 19th for exports with 1.5% of the global total of US$ 15.23 trillion.

A pointer that the real estate boom shows no hint of let up was the massive queues outside Emaar Square as the developer launched its Mira project of 188 townhouses on offer with starting prices as low as US$ 270k. Maybe a more orderly sales process will be in place for their next major release?

Not many police forces can claim to have a Lamborghini in their fleet – but Dubai can. Its latest acquisition is an Aventador 6.5 litre V12 engine car capable of 350 kph and comes with a price tag of US$ 500k.

Dubai Internet City and Dubai Outsource Zone announced a 15% growth in the number of new companies starting business in 2012 – a positive sign of rising confidence in Dubai. It is thought that 90% of all UAE outsourcing emanates in the emirate.

DIC – in partnership with the Kerala government – finally gave the green light to SmartCity Kochin. Phase 1 of the project – covering an area of 400k sq ft – will start in July with the first two buildings slated for completion before the end of 2014.

The Kaloti Group is about to construct one of the world’s largest gold and precious metals refinery in of all places – JLT. Costing an estimated US$ 60 million, it will have the capacity to produce 1,400 tonnes of gold and 600 tonnes of other precious metals.

This may not be a good investment based on the current gold market which has seen prices of the yellow metal plunge to US$ 1,480 an ounce, down 22% over the past six months. The main reason behind this decline is that QE in the US may be coming to an end after almost four years, during which time the Federal Reserve has pumped in excess of US$ 3 trillion of easy money into the economy. A secondary cause is that Cyprus is considering selling US$ 325 million of its gold reserves to prop up its battered economy. This may prompt other countries – including Italy and Spain – to take similar action and get out before the gold price goes down the toilet. A final worry is that there are reports that there is a sell order of 4 million ounces (12.4 tonnes) waiting for execution when Comex opens next Monday.

The Dubai Financial Market Index ended the week at 1956 on fairly thin trading of US$ 122 million. A day earlier, the DFM closed on 1963 – its highest level since November 2009 – on expectations that Q1 reporting will beat initial forecasts.

Within the next two months a mini revolution will hit the local banking industry with the long-awaited adoption of a direct debit payment system. This will see the demise of the current requirement of post-dated cheques to cover mortgages, loans and credit cards. One in five cheques issued (1.4 million), valued at US$ 12.7 billion, are reported to fail either because of insufficient funds or for other reasons.

The often complex – and definitely murky – world of derivative trading was further exposed by Mashreq starting legal proceedings against the Dutch ING Groep. The Dubai bank alleges that it has lost US$ 43 million on investments which were no more than junk rated bank debt despite their specific instructions to stay clear of the likes of CLOs (collateralised loan obligations), CDOs (collateralised debt obligations) and CBOs (collateralised bond obligations).The bank is the latest – but certainly not the last – GCC investor to seek damages for losses in credit derivative trading.

Another Dutch company in trouble was Royal Philips Electronics which has been fined US$ 4.5 million by the US SEC for alleged bribery offices in Poland relating to sales of medical equipment sales.

The career of former Chinese railway minister, Liu Zhijun, has hit the buffers with news that has been charged with corruption arising from his mishandling of huge infrastructure investments such as the US$ 136 billion rail link between Beijing and Shanghai. It can only be hoped that the new Chinese leader, Xi Jinping, is serious about tackling that country’s burgeoning corruption problem.

In the latest survey by Transparency International, the least corrupt countries are Denmark, New Zealand and Norway and the most corrupt in the 174-country survey were Somalia, North Korea and Afghanistan. The so called BRIC nations do not fare so well with Brazil rated 68th, Russia 133rd, India 94th and China 80th. All that tells you is that despite recent impressive GDP growth in those four countries, the gap between rich and poor, or haves and have nots, is widening. If this continues at present levels, there will be inevitable civil unrest on scales never seen before. The trinity of governments, financial institutions and so-called big business have to stop their relentless drive of self-aggrandisement and realise there must be a more equitable distribution of wealth  – otherwise it will be All or Nothing.

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